Sell

High valuations overshadow strong growth

DIL’s Q2 EBITDA was ~13% below our estimate, on margin miss in KFC and higher HO costs.

We retain REDUCE on WESTLIFE and Jun-25E TP of Rs875, due to a lackluster Q1 (9-10% EBITDA miss) and sequential SSG moderation (-6.7% vs. -5% in Q4).

DIL's Q4 EBITDA was 7-8% higher vs. our estimates, largely helped by strong
cost optimization as topline was weaker. Given a glut of weak consumption
trends, with 7/14% SSG decline in KFC/PH, a flat margin is commendable (vs.
250bps QoQ margin decline for Sapphire PH/KFC).

JUBI is up ~10% over the last 1 week. Our channel checks indicate considerable
pick up in order growth for Domino’s in Apr-24 and continued traction should
help it deliver a low-to-mid-teen topline growth in FY25E (vs. 5-6% in FY24E).

We continue to believe that most near to medium term drivers are priced in. However, on account of expected aggressive store expansion in India, we increase our EPS by 3% for FY22/23. The stock is valued at 81 and 65 P/E on FY22/FY23 EPS. We increase our target multiple to 55x P/E (50x earlier) and derive TP of Rs 2,500. We maintain our REDUCE rating. JFL is a far superior company among QSR peers but we see earnings surprises more for other discretionary companies (driven by pent-up, market share gain, pricing, sourcing advantage, make in India etc). Jubilant FoodWorks (JFL) announced the acquisition of Fides Food Systems Coperatief U.A., Netherlands (Fides) for GBP 24.8mn (INR 2.5bn). Fides is the beneficial owner of 32.81% of equity shares of DP Eurasia N.V. (DP Eurasia). DP Eurasia is the exclusive master franchisee of the Dominos Pizza brand, having 771 stores in Turkey, Russia, Azerbaijan and Georgia. It is listed with London Stock Exchange PLC. DP Eurasia has weak financials (due to operational losses in ex-Turkey, financial leverage and currency impact) resulting in a crack in its stock price over the past 3 years (GBX 250 in 2018 to GBX 70 now). The deal is valued at 8x EV/EBITDA of CY19.

Jubilant Foodworks (JUBI) has reported below than expected revenue for Q1FY21 while net loss came-in lower than our estimates. National lock-down and local restrictions have fueled overall decline in revenue. However, with gradual opening of stores, overall business recovered to 53% compared to last year during 1QFY21. Delivery part of business recovered faster (at 77%) compared to takeaways (at 55%) and dine-in (at 3%). Positively, the month of Jul'20 and Aug'20 witnessed strong growth in all three channels; takeaways grew faster than delivery and dine-in. Overall business at the exit of Aug'20 stood at 89% of last year supported by brilliant execution. JUBI...

In its Annual report FY20, Jubilant Foods (JFL) continues to emphasize its 5-pillar growth strategy 1) fortress Domino's in India, 2) elevate customer experience 3) sustained technology investments 4) build portfolio of brands 5) focus on international. With a robust business model, efficient supply chain, large network, strong reputation for quality, hygiene and...

Indian Hotels (IHCL) reported 14.6% drop in revenue to | 1,063 crore (I-direct estimate: | 995 crore) led by 48% drop in income for March 2020. Revenues were flattish at | 4,463 crore in FY20, in contrast to 4% growth on 9MFY20 basis. Consolidated EBITDA margins for Q4FY20 fell 330 bps YoY to 19.6% (I-direct estimate: 20.5%); standalone (pure domestic) business saw a sharper decline of 522 bps. EBITDA for the quarter dropped 27% YoY to | 207.9 crore (I-direct estimate: | 203.7 crore). For FY20, EBITDA increased 16.6% YoY, with higher share of growth coming from international business....

We recommend a SELL on JUBILANT FOODWORKS with a Target Price of Rs 1,408 a downside of 7% from CMP of Rs 1,515 and Stop Loss Rs 1,568.

We expect revenue to grow by 13.4%/13.5% YoY in FY20E/FY21E. We estimate LTL EBITDA margin to compress by 67bps/87bps YoY to 16.5%/15.7% for FY20/21E mainly due to higher employee cost inflation and lower operating leverage. LTL EBITDA growth rate is likely to remain in high single digit mainly led by moderation in growth rates going ahead. Incorporating the improved profitability and turnaround time for stores along with the improvement in ROE due to tax cuts, we revise our PE multiple valuation to 40x (vs. 37x earlier). Our revised target price of Rs1,340...

Net sales, EBITDA and adj. PAT grew 9%, 59% and 125% vs. consensus expectation of 9%, 24% and 21%. Domino's SSSg stood at 5.5% YoY and 7% QoQ. Gross margin declined 66 bps YoY but OPM was up 440 bps YoY at 14.1%, aided by cost saving initiatives and reduction in Dunkin losses (to break-even by FY1..

JUBI's net sales grew by 9.2% YoY to INR7.3b, EBITDA by 59% YoY to INR1b (est. of INR677m) and adj. PAT by 124.8% YoY to INR485m (est. of INR215m) in 2QFY18. SSS grew 5.5% (est. of +6%) for the quarter. JUBI opened one Domino's store and closed one store in the quarter. Gross margin contracted 70bp YoY to 74.1%. EBITDA margin expanded 440bp YoY to 14.1%, led by sharply lower other expenses (-310bp YoY), staff costs (100bp YoY) and rent costs (-90bp YoY). Concall highlights: 1) Healthy growth witnessed after product refresh in August. 2) Management clarified that it is unlikely to take any price increase...

After a disastrous performance in 4QFY17, Jubilant FoodWorks (JFL) has reported a strong set of numbers for the quarter ended June 30, 2017, ahead of our estimates. While net revenues grew by 11.5% YoY to Rs6.8bn (estimate of Rs6.4bn), Net profit surged by 25.5% YoY to Rs238mn...

Jubilant 2.0 Execution Remains a Concern; Downgrade to REDUCE Jubilant FoodWorks (JFL) has posted a disappointing performance across all operational parameters in 4QFY17. Net sales fell by 0.9% YoY to Rs6.1bn, while EBITDA declined by 15.1% YoY to Rs605mn. Reported net profit fell from Rs278mn to Rs67mn on yoy basis, although the decline is also attributable to exceptional expense of Rs122mn in the quarter, apart from poor...